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China has all but stopped buying iron ore, sending prices lower and fears of a slowdown higher. Prices have tumbled by more than a third in the past three months, but that trend may be ripe for a reversal, which could prove good news for the global economy, as well as iron investors

China has done this before. Manufacturers there are notoriously savvy in their purchases of raw materials, especially iron ore, the key ingredient in steel-making. And since China scoops up 60% of global iron-ore exports, a slowdown in buying underlines concerns that China, and perhaps the global economy, may be in a worse slowdown than generally expected. Cash iron-ore prices for delivery to China fell below $90 a metric ton last week, a three-year low. They are down 35% from July, according to data provider Steel Index.

In a slowing global economy, demand for the appliances, construction parts, and other goods China ships abroad also slows—hence the nation's weakening need for iron. Chinese steel mills are now running down their iron-ore inventories and slowing their steelmaking. "The Chinese have almost completely withdrawn from the [iron ore] spot market," according to a recent Credit Suisse report.

This is nothing new. Ore prices retreated in both 2010 and 2011 when China's steel industry slowed and iron-ore buyers backed off, only to rebound by an average of 36% from their lows before the year was out, once China re-entered the market.

As for when China will come back to the market this time, changes in inventories will tell a big part of the story. A survey of Chinese steel makers by data provider MySteel shows iron-ore stockpiles at a sampling of mills have fallen by 30% in just two months.

There's still a lot of ore piled up at Chinese ports. But at the current pace, China will need to start rebuilding inventories within the next two months, Credit Suisse says, likely pushing prices to between $100 a ton and $120 a ton. Other market watchers are expecting prices to run toward $140 a ton.

On Friday, benchmark iron ore delivered to China rose 2.3% to $89 a metric ton after Beijing announced it had approved subway and road-construction infrastructure projects.

A caveat: All bets are off if the global economy deteriorates spectacularly and Chinese steel-making grinds to a halt.

The best way to take advantage of this anticipated surge in iron-ore prices is via the stock of mining companies. Their shares tend to react more immediately and dramatically than the commodity price to a perceived shift in the market, says Bart Melek, head of commodity strategy with TD Securities. "First things first: These inventories have to go away," Melek says. "But I would expect equities to rise on that anticipation."